Chips, tourism and goods consumption to underpin stronger 2024 ASEAN+3 growth: AMRO

gettyimagesbank

Growth in Southeast Asia and three key economies in East Asia will be robust this year, buoyed by accelerating external demand for semiconductor manufacturing, tourism and goods consumption, the ASEAN+3 Macroeconomic Research Office (AMRO) said Monday.

AMRO is an international organization seeking to secure the macroeconomic and financial resilience and stability of its 14 member economies. Included are the 10 member states of the Association of Southeast Asian Nations (ASEAN), as well as China, Hong Kong, Japan and Korea.

Many economies in the region await a dovish pivot from the U.S. Federal Reserve, the global body said. However, the policy path of the world’s most influential central bank will not be the sole determinant in lowering key rates, due to sustained elevated price levels of goods and services and the dynamics between the U.S. dollar and regional currencies.

Korea is forecast to grow 2.3 percent this year, propelled by a rebound in chips exports, it added, with inflation to be tempered at 2.5 percent. ASEAN+3 region is expected to grow at 4.5 percent this year, up from 4.3 percent in 2023.

These were the key mentions of economic developments in its annual flagship report titled “the ASEAN+3 Regional Economic Outlook (AREO) 2024.”

“This year we expect the external demand to be much stronger and that is going put a boost for growth particularly from semiconductor, tourism and also goods consumption in the U.S.,” AMRO Chief Economist Hoe Ee Khor said during a virtual conference held from 10 a.m. to 11 a.m. (local time).

Last year’s consumption and investments were very strong, but inflation and interest rates were relatively high, he said. These proved a drag on the economy alongside real estate jitters.

However, investments are likely to pick up this year as financial conditions have eased somewhat, providing more breathing space for enterprises.

“The labor market remains very strong, and I think consumption remains relatively resilient this year. Those factors will provide impetus for the member economies this year and the next.”

Some member countries will have to keep a sufficiently tight monetary policy, the chief economist added.

Factored into the judgment is the continued strength of the U.S. dollar, which it deems is not a result of particular currency issues, but is more of an overarching foreign exchange volatility matter.

“Currency weakening is [experienced] generally as a group and so many of the member economies are still not very comfortable easing because that would mean exchange rates in each economy will come under greater pressure,” he said.

“Inflation in some countries remains quite high. Even though core inflation has come down, it is not low enough for the central banks to feel comfortable to ease the rates.”

The member economies have reduced fiscal headroom, in his view, due primarily to huge stimulus measures put in place over the past few pandemic years.

“Our view is that there’s still moderate fiscal space but the space itself has been reduced because of the elevated public debt level by 10 to 20 percent. This means less room to increase the borrowing.”